Americans for Prosperity recently published a report explaining why each summer Congress should legislatively respond to Supreme Court decisions interpreting federal statutes.
The report makes a simple point: when the Supreme Court interprets a statute, its job is to say what the law is—not what it should be. If Congress disagrees with the result and wants the statute to mean something else, the Constitution provides it with the tool to do so: amend the statute. Yet this legislative response remains chronically underused.
Congress should amend 15. U.S.C. § 78u(d)(7) to clarify that disgorgement is a legal remedy and amend § 78u(d)(5) to clarify that disgorgement is not available under that provision because it is not an equitable remedy.
Background
On January 1, 2021, in response to Liu v. SEC, Congress amended 15 U.S.C. § 78u to add subsection (d)(7), which expressly authorizes the SEC to seek and obtain disgorgement as a remedy for violations of the securities laws. In Liu v. SEC, the Supreme Court had held that 15 U.S.C. § 78u(d)(5), which authorizes the SEC to seek “any equitable relief that may be appropriate or necessary for the benefit of investors” authorizes disgorgement in some circumstances but with limitations. Congress expressly allowed the SEC to seek disgorgement which created conflicts in the law that should be resolved statutorily.
Supreme Court Ruling
In Sripetch v. Securities and Exchange Commission, 146 S. Ct. 1403 (2026), the Court ruled that 15 U.S.C. § 78u(d)(3)(A)(2), which allows the SEC to seek “disgorgement under paragraph (7) of any unjust enrichment by the person who received such unjust enrichment as a result of such violation” does not require a showing of pecuniary loss to investors. Without demonstrated injury to individuals, disgorgement serves to deprive wrongdoers of their net profits from unlawful activity but does not make whole any injured party.
This ruling creates a tension. Traditionally, equitable rewards are intended to establish equity between the victim and the perpetrator and are only rarely payable in dollars, which is generally considered a legal remedy. This distinction matters because pursuit of a legal remedy would trigger the Seventh Amendment’s provision of a right to a jury trial. In Stripetch, the SEC was allowed to seek a monetary award, payable to the U.S. Treasury, without demonstrating injury to a private person or paying the award to an injured party.
AFP-Supported Congressional Response
Congress should amend § 78u(d)(7) to clarify that disgorgement, as used there, is a legal remedy and amend § 78u(d)(5) to clarify that disgorgement is not available under that provision because it is not an equitable remedy. This would eliminate any confusion between defining disgorgement to operate as a legal remedy despite its long history as a form of equity. If would also ensure that if the SEC seeks disgorgement, it must do so in federal court subject to the Seventh Amendment’s jury-trial right. Congress should also limit the SEC’s disgorgement power under § 78u(d)(7) to circumstances in which victims of securities violations suffered actual monetary harm and require that any funds disgorged in such proceeding should be awarded to victims and not deposited in the federal treasury.
Cindy Crawford is Senior Policy Counsel at Americans for Prosperity Foundation.
